Facebook Stock Soars As Share Lockup Ends

Shares of Facebook Inc jumped as much as 11.2 percent on Wednesday, even as the biggest block of shares held by insiders became eligible for sale for the first time since the social media company's disappointing debut in May.

Shares of Facebook Inc
jumped as much as 11.2 percent on Wednesday, even as the
biggest block of shares held by insiders became eligible for
sale for the first time since the social media company's
disappointing debut in May.

Facebook shares were up 8.5 percent at $21.54 in heavy
morning trade on the Nasdaq, off an earlier high at $22.09.

"While the lockup is expiring, there is nothing requiring
anybody to sell," said Tim Ghriskey, chief investment officer at
Solaris Group in Bedford Hills, New York. "Given the low price,
these long-term holders are deciding to hold the stock, and that
is lifting it here as the fear of the expiration subsides."

Roughly 800 million Facebook shares were eligible for sale
on Wednesday after restrictions on insider selling were lifted
on the biggest block of shares since the May initial public
offering.

The lockup expiration greatly expands the 921 million-share
"float" available for trading on the market until now.

Facebook, the world's No. 1 online social network, became
the only U.S. company to debut with a market value of more than
$100 billion. But its value has dropped nearly 50 percent since
the IPO on concerns about money-making prospects over the long
term.

Insider trading lockup provisions started to expire in
August, and the rolling expirations have added to the pressure
on Facebook's stock.

Restrictions on Facebook insiders selling their shares have
expired in waves. A restriction on more than 200 million shares
expired on Oct. 29.

COST OF SHORTING

Pivotal Research Group analyst Brian Wieser said he did not
expect Facebook insiders to sell all of their shares as the
lockups expired.

"I would expect heavy volumes over the next few weeks, but
not undigestible volumes," said Wieser. By his estimate,
roughly 486 million of the nearly 800 million newly freed
Facebook shares will be sold.

There is some evidence that the heavy interest in "shorting"
the stock was dissipating, given the poor performance since it
first sold shares in May. Investors who believe a stock will
fall can bet against it by shorting the stock, that is,
borrowing it and selling it in the hopes it will decline.

According to Markit's Data Explorers, about 28 percent of
the shares available for short-selling were being borrowed for
that purpose, down from a high of more than 80 percent in early
August.

Similarly, SunGard's Astec Analytics, which also tracks
interest in shorting, noted that the cost of borrowing Facebook
shares is down more than 50 percent since the beginning of the
month.

"Everything would seem to indicate the market is losing its
appetite to short Facebook," wrote Karl Loomes, market analyst
at Astec.

The cost of shorting Facebook has declined to 0.18 percent
on an annualized basis, Astec said on Wednesday. By contrast,
shortly after the IPO, the cost to short the stock ranged from
40 to 50 percent annually.

"It's become somewhat of a controversial stock - it always
adds fuel to the fire if you have a sizable short position,"
said Stephen Massocca, managing director at Wedbush Morgan in
San Francisco.

"But the unlock is not new news. It doesn't mean everyone is
going to sell and it doesn't mean every order is going to come
in today."

Several members of Facebook's senior management have sold
millions of dollars' worth of shares in recent weeks through
pre-arranged stock trading plans as lockup restrictions expired.

Chief Operating Officer Sheryl Sandberg has sold roughly
530,000 shares this month, netting just over $11 million, though
she still owns roughly 20 million vested shares in Facebook.

In August, Facebook board member Peter Thiel sold roughly
$400 million worth of Facebook stock, the majority of his stake,
when an earlier phase of lockup restrictions expired.

Facebook's 28-year-old chief executive, Mark Zuckerberg, has
pledged not to sell any shares before September 2013.

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